South Carolina Life Insurance Practice Exam

Which type of life insurance policy provides coverage for a specified period and typically does not accumulate cash value?

1. Whole Life Insurance

2. Term Insurance

3. Universal Life Insurance

4. Variable Life Insurance

The correct answer is: Term Insurance

Term insurance is designed to provide coverage for a specific period, such as 10, 20, or 30 years. It is a straightforward type of life insurance that offers a death benefit to the beneficiaries if the insured passes away within that term. One of the key characteristics of term insurance is that it typically does not accumulate cash value over time. Instead, it is purely protection-focused, making it an affordable choice for individuals who want to ensure financial security for their loved ones for a limited duration. Whole life insurance, on the other hand, is meant for the insured's entire life and does build cash value that grows over time. Universal life insurance is flexible, combining both the death benefit and a cash value component, allowing policyholders to adjust their premiums and death benefits. Variable life insurance also includes a cash value component, but it allows policyholders to direct their cash value into various investment options, which can lead to fluctuating values based on market performance. Therefore, term insurance uniquely fulfills the criteria of providing coverage for a set period without the feature of accumulating cash value, making it the appropriate choice in this context.